Autumn budget 2021 summary

The Autumn Budget 2021 has landed, and as with most Government fiscal announcements, there’s plenty for UK business owners and individuals to digest. We’ve pulled together the key takeaways that are likely to affect your finances over the coming months and years. Whether you’re a sole trader, director, or simply planning your personal finances, there’s something here worth knowing about.

The National Insurance Increase and Employment Costs

One of the most significant changes announced was the 1.25 percentage point increase in National Insurance contributions, effective from April 2022. For employers, this means a rise in secondary threshold National Insurance from £9,100 to £9,100 (though the threshold itself increased), but effectively you’ll pay more on profits above £175 per week. For employees, primary contributions also increase by 1.25%, applied to earnings above £12,570.

If you run a business with staff, this is worth factoring into your payroll planning now. The impact on your bottom line could be material, especially for smaller firms operating on tighter margins. Self-employed individuals should also note that Class 2 and Class 4 National Insurance contributions will rise accordingly—something to consider if you’re reviewing your accountancy software or payroll provider.

Corporation Tax and the 19% Rate

The Chancellor confirmed that the corporation tax rate will remain at 19% for the 2021/22 tax year, which is good news for company directors. However, there were hints that future rate rises might be on the horizon as part of the Government’s fiscal consolidation plans. For now, this stability is welcome, particularly if you’re planning your corporation tax position for the year ahead.

If you’ve been considering incorporating as a limited company, the current 19% rate makes this an opportune moment to review your structure with your accountant. The difference between the company rate and higher-rate income tax (45%) can be significant for higher earners.

Universal Credit and the Cost of Living

Whilst not strictly a tax matter, the decision to increase Universal Credit by £20 per week (before later being reversed) and the emphasis on supporting households through rising energy costs shows the Government’s awareness of economic pressures. For employers and individuals reliant on state support, these changes matter. If you employ staff who may be affected, understanding these shifts can help with workforce planning and retention strategies.

Dividend Allowance and Investment Income

The dividend allowance remains at £1,000 for the 2021/22 tax year, which is the amount of dividend income you can receive tax-free. If you’re a company director taking dividends, you’ll want to ensure you’re extracting profits in the most tax-efficient way possible. Combining a salary up to the Personal Allowance (£12,570) with dividends up to the allowance can be a sensible approach—but every situation is different, and professional advice is worth its weight in gold here.

Planning Ahead: Key Actions for Your Business

With spring 2022 just around the corner, now is the time to prepare for these changes. If you employ staff, review your payroll calculations and budget for the National Insurance increase. If you’re self-employed, factor in the higher contributions when forecasting your tax liability for the 2021/22 and 2022/23 tax years.

It’s also worth reviewing your overall tax position for the year. Self-assessment returns must be filed by 31 January 2022, so if you’re not yet compliant, contact your accountant urgently. Similarly, if you’re a company director, ensure your corporation tax return and accounts are up to date with Companies House—late filing incurs penalties.

For those thinking about pension contributions, remember that relief is still available at your marginal rate of tax. If you’ve had a good year, maximising pension contributions can both reduce your tax bill and boost your retirement savings.

What Next?

The Autumn Budget reflects an evolving economic picture, with growth returning but inflation rising. The tax and National Insurance changes are significant enough to warrant a review of your financial planning, whether that’s at personal or business level.

We’d recommend taking time to understand how these changes affect you specifically. Tax is rarely one-size-fits-all, and the decisions you make now could save you money over the coming years.

For tailored advice, contact Severn Accounting — we’re here to help.